On 22 May 2014, Ofwat (the UK water sector regulator) opened a consultation on proposed commitments from water supplier Bristol Water PLC. If formally accepted by Ofwat, these commitments would deal with concerns about Bristol Water abusively leveraging a dominant position (in breach of UK competition law) in certain upstream services to harm effective competition for certain downstream services for which it competes with third parties.
This is a rare example of a vertically integrated company being found (albeit provisionally, and with no formal finding likely) to be leveraging its upstream dominance into downstream markets. The same principles apply throughout the EU.
Bristol Water is the monopoly provider in its geographic area of certain upstream, noncontestable services (supply and maintenance of water infrastructure). Downstream, it competes with independent third parties (self-lay organisations or SLOs) to provide new connections infrastructure. As a result, where a property developer customer asks Bristol Water (instead of an SLO) to provide new water infrastructure, Bristol Water effectively provides noncontestable services to itself so as to facilitate those services over which it competes with SLOs.
Following complaints, Ofwat identified four specific competition concerns related to Bristol Water’s conduct that potentially could restrict entry and expansion of competitors in the provision of new water connections. The main commitments offered by Bristol Water are structural and process commitments designed to recognise that Bristol Water’s own downstream developer services function competes with SLOs and that both are customers of Bristol Water’s noncontestable (dominant) upstream services.